Net worth is often used as a measurement of individual, or household, wealth. This value can give you a holistic perspective of your financial situation. In fact, the average American net worth is $68,828, according to the U.S. Census Bureau’s 2011 study on wealth and asset ownership. But how is this figure calculated? And how do you calculate your own net worth? Below, we take a closer look at the factors that distinguish your net worth from your fellow Americans.

Net worth is often used to contemplate the earnings of celebrities and high-profile individuals. But this measurement can be useful for anyone looking to manage their finances. If you know how much you’re spending in comparison to how much you’re earning, you’ll be able to be more strategic with your money. But before we determine the average American net worth, we should first explore its definition and how it works.

Net Worth Defined

Net worth is the measurement of your net assets, which is basically the total of what you own minus any remaining liabilities or debt. An asset represents anything with value that either acts as money, can be transformed into money or can generate revenue. Your assets could include your money in a retirement savings plan, the funds in a checking or savings account, physical cash or property. Personal property, investments, money market accounts and certificates of deposit (CDs) also count as assets. Once you’ve added up the value of all your assets, you’ll be ready to calculate the sum of your liabilities.

Your liabilities represent what you owe. For instance, when determining your net worth you’d have to take into account things like student loans, personal loans or mortgage payments. Expenses like property taxes also count as liabilities. You’d then subtract the total of your liabilities from your total assets to calculate your net worth.

Household Net Worth

In order to measure the average net worth of Americans, the U.S. Census Bureau bases the final value on households, not individuals. It measures household net worth across a number of demographics, including education level and age. In addition, the final average household net worth value represents the median value of all U.S. households. Therefore, the results represent a midpoint, and not an average, of all the data studied. The median is a more accurate representation of American net worth, because there are outliers that would skew the mean value. The outliers are individuals or households with extremely high net worths. This might make the American mean net worth appear higher than it actually is.

The data presented some notable trends within net worth. Older Americans typically possessed a higher net worth than younger Americans, according to the U.S. Census Bureau study. The median net worth for householders over the age of 65 was $170,516, while the median net worth for those under 35 was only $6,676.

The median net worth also changed based on the education level of householders. For householders with no high school diploma, the study found a median net worth of $9,800. The study indicated a median value of $43,945 for high school graduates. Householders with some level of college, but no degree, generated a median net worth of $49,082. For householders with an associate’s degree, the median net worth was $56,512. Those who earned a bachelor degree generated a median value of $147,148. Finally, for householders with a professional or graduate degree, the median net worth was $240,750.

Net Worth by Region

The study also featured regional trends in median American net worth. The regions studied included the Northeast, Midwest, South and West. The median household net worth value for those in the Northeast was $91,025, while it was $81,049 for those in the Midwest. For the South, the median value was $60,700. The net worth value for the West was $59,431.

Bottom Line

Whether you’re earning millions or just starting out with your first salary, determining your net worth is nonetheless important. If you’ve got liabilities such as loans or car payments, you’ll need to compare that to the amount of money you’re earning. You’ll have a negative net worth if you’re spending more than you’re earning, but you’ll have a positive net worth if you’re earning more than you’re spending. After calculating this value, you’ll be better equipped to manage your wealth.

 Tips for Saving

• One of the most effective ways to maximize your finances is by creating a budget. With a budget, you can compare your expenses with your income. This can help you determine whether you’re earning more than you’re spending, or vice versa. Whatever the case, you’ll then have a better idea of which steps you need to take to reach your savings goals.

• Though budgeting is a strategic method for managing your finances, hiring a financial advisor could also be right for you. Whether it’s estate planning, financial planning or investment management, expert advice can never hurt. If you’d like professional advice with your finances, consider using SmartAsset’s financial advisor matching tool. You’ll just need to complete a short questionnaire about your financial situation, and the tool will match you with up to three local advisors suitable to your needs.

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